Don’t Sell All Your Gold! Say Ned Davis Strategists

By Brendan Conway

Ned Davis Research commodity strategists John LaForge and Warren Pies argue this week that gold has a chance for a comeback — just don’t count on it soon.

“It is the short-term tape that is damaged, not necessarily the long-term tape or the fundamental macro backdrop,” the duo writes in a Thursday client note. Real interest rates remain low and central banks continue to print money, they note — and real rates remain in what they term a “sweet spot” for gold.

So why the awful price action lately? LaForge and Pies tie it back to the single data point that shows much of any correlation to gold’s price — real interest rates. More specifically, the trend in real rates. Real interest rates — defined as interest rates minus inflation — “have been trending the wrong way since gold’s August 2011 price peak,” they write. Chart here:

Also worth noting: The gold market appears lately to be more interested in the inflation part of the real-rates equation, at the expense of the interest rate portion, they write. Thus, at a time when inflation expectations have been slumping, the effect on the gold market is magnified:

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There are 2 comments

MAY 3, 2013 9:52 A.M.

VARINVEST wrote:

Don't sell fools,i've sold out all my positions in this HUGE ASSETBUBBLE.

MAY 6, 2013 2:11 P.M.

eddy112 wrote:

Laforge and Pies must have "SOME" eye for trends. The red oscillating line looks awful trendless to me. It looks no differnt than many of the other ones where gold rose sharply instead of falling. In my opinion, here is another 'bright' fella trying to find a cause and effect for the gold smash. I've heard all kinds of 'reasons' so far - unemployment rate, inflation down, afraid of the FED, Cyprus - none of these make any sense.

The only one I've seen so far that makes sense is manipulation. Detailed records during the trading period show massive numbers of large trades hitting the London and Comex markets during normally quiet times (in the middle of the night and on Sunday). These were computer generated short trades (High Frequency Trading), that could not me matched with long trades. They were designed to push the market down and uncover most of the protective limit stops. Once these stops were flushed the market collapsed and the high frequency trades ended. These types of trades are done for manipulation not the selling of real metal. No real investor is going to offer $100 million in gold to the market on a Sunday night and expect to get a good price.

With so many crooks running the LBME and Comex, it's not surprising the small and medium sized investors are out and now actually buying the coins and bullion. I personallly have always avoided the Comex and the SPDR GLD fund, and will continue to do so until the US government no longer allows a broker from dumping 100 million in gold short contracts on the market in a 30 minute period.

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